The FHA Mortgage Review Board sent a message to FHA lenders across the nation. “If you want to originate FHA loans, then do not commit mortgage fraud.” The government review board yanked its approval stamp from 905 national FHA mortgage lenders for 1 year. An additional 147 FHA lenders were said to have failed to timely meet requirements for annual FHA recertification, but are now in compliance.
The HUD Reform Act of 1989 established the Mortgage Review Board with the goal of to monitoring approved FHA lenders for violations of the agency’s program requirements. The question is — Will the lenders survive for a year without the ability to originate FHA home mortgage loans? Read the original mortgage news post online > FHA Mortgage Lenders Lose Certification.
After several mortgage bailouts a no end to loan defaults insight, it is not unreasonable to ask the question —- Why do we need both Fannie Mae and Freddie Mac? In a recent article in the Huffington Post, a strong recommendation from the editor arose for Fannie Mae and Freddie Mac to clean up their act and merge the two government mortgage giants. The Huffington blog called for a new strategic plan for Fannie and Freddie to find a common goal and merge. The federal government has gotten tangled too deep in this mortgage mess and many believe if they continue it will significantly prolong the recession. The FHA mortgage loan programs have been able to recover so why can’t Fannie and Freddie follow suit?
The Post points out that merging Fannie Mae and Freddie Mac to form “Fannie Mac” is a logical step to shift responsibility to new stockholders. The plan will also return the taxpayers’ subsidies to the Treasury. Both GSEs have similar missions. Most of their loan programs are comparable and the merger is logical. The new Fannie Mac will trim its staff and get rid of highly paid senior and middle management who perform the same functions. The GSEs have one-to-four family, home-lending divisions that buy home loans from banking institutions. They have separate divisions to purchase multifamily loans for rental properties with five units or more. Some of the programs within each division are similar enough to be combined and further reduce the company’s size. These government mortgage companies need to dispose of the dispose of their toxic assets like the loan defaults, and bad credit home loans.
The National Mortgage News reported that because of the increased risks associated with FHA mortgage loans, the U.S. Department of Housing and Urban Development finalized regulations that will dramatically change the delivery of FHA loans to the public. The key changes announced by HUD eliminate loan correspondent approval, increase net worth requirements for FHA-approved lenders up to ten times what is currently required, and amend principal-agent relationship requirements.
The new regulations bring huge changes to the FHA mortgage program, which will be upon us by May 20th. It is critical that all FHA-approved lenders, as well as those mortgage lenders and brokers interested in participating in FHA programs, understand how these regulatory changes will affect their FHA lending activities.
This one-hour webinar will help you learn more about these new regulations FHA guidelines and how they will impact your business. There will be time at the end of the webinar for questions. Registration closes at 5 p.m. EDT on May 11th. To get signed up, visit http://www.klgates.com/events/Detail.aspx?event=2291
It is very important that you consider the lending costs and benefits when comparing mortgage refinance loans. Charles and Nancy Henson refinanced their home mortgage last year, and Charles Henson says it was not a difficult decision. “The mortgage rates had dropped, and we wanted to do something a little more secure,’’ he said. “Our previous rate was 5.625%. We ended up locking our home loan at 4.875%.’’ The current mortgage rates have spurred many to consider mortgage refinancing – basically replacing one loan with another. Depending on the new loan’s terms, it can save you tens of thousands of dollars.
Each refinance mortgage is its own case, due to many factors: your loan, your credit, your home’s equity, the interest rate, the cost of the refinancing, and so on. Some things to consider:
■ Interest rate. “If you can save half a point or more on your interest rate, that can be a good indicator to refinance,’’ said Kay Sandusky of Citizens National Bank of Southwestern Ohio. Sandusky added: “If it is going to cost you $2,000 to do the refinance and you are saving $200 per month, do the math and consider how long you will be in the home and if that is a savings to you.’’ “How long you’re going to be in the home is a big factor,’’ Penner said. “If someone is going to live in the house three to five years, [refinancing] may not be a great idea.’’
■ Total cost benefit. Kim Penner of Union Savings Bank said you have to consider total costs when considering refinancing. “Your lowest interest rate alone is not always your best deal,’’ Penner said. “You have to see if it makes sense to get a lower rate if your costs are high.’’
■ Short term vs. long term. “Think about what term of loan you want,’’ Penner said. “Is cash flow an issue? Are you looking at retiring?’’ He added that the sooner you pay off a loan, the more you save on interest payments. “The difference in interest could be $40,000, $50,000, $60,000,’’ Penner said. Henson is retired and his wife is self-employed, but he said they chose a 30-year rate because it was a more conservative approach, given the economic climate. They “decided we could make a 30-year into a 15 by paying more on the principal each year,’’ Henson said. “With a 30-year rate, you have the flexibility if you want to pay extra.’’
■ Credit score. Borrowers who have at least a 740 get the best terms. If your credit score is lower, you can still get a loan, but at a higher interest rate.
■ Know your home’s equity. “You have to have 20% home equity ask for a conventional home loan without private mortgage insurance,’’ Sandusky said, though there are other options. FHA home loans have mortgage insurance, but if your credit is outside of the conventional box or if you have no equity, talk to a FHA mortgage company, because these government loans may be your best option for refinancing.
■ Talk to a professional. “I ask a lot of questions about the borrower and offer options,’’ Penner said. Be careful shopping for a mortgage online. Don’t let banks obtain your credit report each time. “Multiple inquiries on your credit report in a short period of time can harmful to your credit,’’ Sandusky said. “Know your credit and tell the bank.’’
The Federal Housing Administration is following through on promises to come down hard on FHA mortgage lenders. The federal mortgage insurer on Monday said it had pulled the licenses of three lenders and was suspending a fourth FHA lender.
The FHA said it would eject Strategic Mortgage Corp., of Oklahoma City, Okla.; ProMortgage Inc., of Claremore, Okla.; and Americare Investment Group Inc., of Arlington, Texas. It suspended Home Mortgage Inc., of Burr Ridge, Ill., for six months. The FHA said it ejected Strategic and ProMortage for failing to uphold FHA loan standards, including charging excessive fees and having poor quality controls. Americare violated terms of a previous settlement, and Home Mortgage failed to disclose the indictment of a part-owner, it said.
Representatives for Strategic and ProMortgage didn’t respond to inquiries seeking comment. Americare and Home Mortgage couldn’t be reached. The FHA, which doesn’t make loans but insures lenders against losses, has seen its capital cushion erode sharply amid rising mortgage defaults. Officials have promised to be vigilant in cracking down on lenders it believes are putting the agency’s reserves at risk.
Mortgage professionals will have to get used to a new “Good Faith Estimate” to be disclosed in 2010. The U.S. Department of Housing and Urban Development (HUD) has updated and re-released “Shopping for Your FHA loan: HUD’s Settlement Cost Booklet.” A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages, addresses the standardized Good Faith Estimate (GFE) and HUD-1 settlement statement forms that lenders must start using on Jan. 1, 2010.
HUD estimates that consumers could save almost $700 in costs and fees per mortgage loan on average as a result of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA). In addition to the updated literature, the agency has set up a RESPA “FAQ” section and other information on a dedicated RESPA page so that consumers, settlement service providers and lenders can gain a better understanding of the new rules.
HUD announced they were making changes to the guidelines for with FHA mortgage products. The Federal Housing Administration still has money, but its loan reserves are depleting to dangerously low levels. FHA’s capital reserves are supposed to be 2% of outstanding loans. According to the actuarial review for fiscal year 2009, the reserves are a mere 0.5%. By the time you read this, FHA loan reserves might have disappeared entirely, thanks to the increasing number of FHA home foreclosures. All FHA borrowers pay a mortgage insurance premium. These premiums go into the FHA’s capital reserves fund and are used to pay for home loans that are foreclosed upon. As FHA refinance loans and purchase mortgages have become much more popular, and the unemployment numbers have risen, more of these loans have gone bad, requiring more payments from the capital reserves.
Unlike the Federal Deposit Insurance Corporation , which recently proposed that banks pay three years of insurance premiums at once in order to replenish the FDIC’s reserves, FHA can’t require current borrowers to pay more. But it can change the rules going forward that will make it more difficult to qualify for an FHA loan. According to a senior official at the Department of Housing and Urban Development , conversations are ongoing to determine what will make the most sense. “Nothing will be taken off table,” the official said. “Everything needs to be assessed through the lens of the FHA core mission as well as the broad economic policies of the Administration with regard to stabilizing housing.”
Applications for home mortgages dropped to a seasonally adjusted 2.8% for the week ending September 25, compared with the week before. The Mortgage Bankers Association announced yesterday that VA mortgage rates were better, as were FHA mortgage rates. Many borrowers are excited for the low rate refinancing with FHA customers rushing to qualify for FHA streamline refinance loans that are seeing interest rates below 5% for the first time in a while. The average fifteen mortgage rates declined to 4.46% last week which is down significantly from last year when rates were at 5.78%.
According to Bryan Dornan, “The best time for a streamline loan for refinancing your FHA mortgage is when you are saving a significant amount of money monthly without adding on additional years with the new mortgage terms.Read the original article “When FHA Streamline Makes Sense for Mortgage Refinancing.”
Three mortgage lenders approved to originate loans insured by the Federal Housing Administration were suspended by the U.S. Department of Housing and Urban Development over “serious” violations.HUD recently announced their Mortgagee Review Board had suspended Golden First Mortgage Corp. The Great Neck, N.Y., company allegedly neglected to notify HUD of an Office of Thrift Supervision investigation into the activities of its president or his involvement in an OTS civil money penalty.Suspended FHA lenders are not allowed to sell new FHA-insured loans while HUD investigates their FHA lending practices, the statement said.
FHA mortgage rates remain low and the Federal Reserve has ensured FHA lenders and banks offering HUD loans his commitment to making affordable home financing available to Americans.When shopping for a FHA lender, Lenders Nationwide recommends that consumers consider FHA mortgage companies that have a clean HUD record.
The impact on Taylor Bean and Whitaker shutting down wholesale will be significant for mortgage brokers across the country.Many mortgage companies used TBW for all their FHA home loans and this will hurt them.The loss of Taylor, Bean and Whitaker as a wholesale lender is a major blow to U.S. mortgage brokers who say it means home loan applicants who were in process at the wholesaler will need to purchase new appraisals and potentially sit through new waiting periods.
Taylor Bean disclosed Tuesday that it lost its FHA approval and that its Ginnie Mae servicing portfolio was seized. Then it surprised its customers Wednesday with a notice indicating it stopped originating, closing or funding any home loans. In a news release today, the National Association of Mortgage Brokers called the Ocala, Fla.-based lender “a major channel for wholesale mortgage funding.”
The Mortgage Bankers Association announced that the mortgage refinance gauge decreased to 1,482.2, the lowest reading since November, from 2,116.3 the previous week. The home purchase index fell to 267.7 last week from a two-month high of 280.3. Unemployment, which touched a 26-year high in May, and rising borrowing costs discouraged homeowners from refinancing, while a growing number of home foreclosures sidelined potential buyers waiting for house prices to stop declining.
The share of home loan applicants seeking to refinance loans plunged to 46.4% of total applications last week from 54%. The average interest rate on a 30-year fixed-rate mortgage loan fell to 5.34% from 5.44% the prior week. The rate reached 4.61% at the end of March, the lowest level since the group’s records began in 1990. At the current thirty-year mortgage rate, monthly borrowing costs for each $100,000 of a loan would be $558, or about $62 less than the same week a year earlier, when the rate was 6.33%.Many loan officers have voiced their concern that market needs to keep conforming and FHA mortgage rates low until the housing sector can recover.
Do You Qualify for the hottest mortgage loan, HARP?
FHA refinance loans aren’t always attainable for self-employed borrowers looking for fixed rate refinancing, because HUD requires full income documentation.Loan modification plans can be nearly impossible for borrowers in high cost regions like California, New York and Florida who have jumbo mortgage loans.Mortgage relief is often easier said than done.
When the stimulus package passed, millions of homeowners felt they were dissed. While the new mortgage relief program focuses on homeowners in foreclosure, it offers nothing for the homeowner who is responsible and current with their home loan payment. To compensate for this oversight, the U.S. Department of Treasury recently launched the Home Affordable Refinance Program (HARP). “HARP was created specifically to provide access to reduced-cost home refinancing for responsible homeowners with no equity in their home. Millions of Americans have lost their home equity due to the decline in home prices,” said Joe Engle, president of Loan Smart, Inc. in Thousand Oaks, California.
Presently, millions of homeowners find themselves in the unsettling predicament of having to sit on high mortgage interest rates that are not affordable or about to rest to a higher payment that will tip the budget negatively.Most good borrowers are unable to refinance their homes and take advantage of historically low interest rates, because of the declining home values.
Through the Home Affordable Refinance Program 4 to 5 million responsible homeowners will have the opportunity to refinance their homes, even if they owe more than 80% of their property’s value. “With low fixed rate mortgage refinancing, many families could see a reduction in their mortgage payments by thousands of dollars per year,” said Engle. Unfortunately, not everyone qualifies for Home Affordable Refinance Programs. This refinance program only benefits homeowners with home mortgages owned or guaranteed by Freddie Mac and Fannie Mae, which are Government Sponsored Enterprises. “At Loan Smart, we can assist homeowners with determining if they qualify for HARP by researching to find out if their loan is owned by either Freddie Mac or Fannie Mae,” commented Engle. Engle points out that HARP will offer a huge advantage to homeowners with first and second mortgages. HARP will allow for refinancing of the first mortgage up to 105% of the current home value, with the second mortgage remaining in place.
Most mortgage industry insiders believe there is still a 12 to 18 month window of opportunity left for foreclosure prevention services like loan modification and loan workouts.Loan modification leads are still hot in the mortgage marketing circles. Foreclosure scams continue to run rampant and that makes consumers very weary.
New measures are being implemented to take aim at what consumer groups say is a surge in fraud by entities offering to help struggling homeowners modify their home mortgage loans or avoid foreclosure.“There are a lot of different scams going on right now,” said Martha Lucey, president of ByDesign Financial Solutions, a nonprofit credit-counseling agency. “Homeowners are struggling with affordability and many are desperate. When consumers are desperate, they’re willing to pay for unrealistic financial solutions.”
The most common allegations involve struggling homeowners who make up-front payments, often in the thousands of dollars, to firms that promise to work with their mortgage lender to renegotiate their mortgage and lower their monthly home loan payments. The mortgage loans are never changed and the money is gone.
A bill by state Sen. Ron Calderon, D-Montebello, would prohibit firms from charging advance fees for mortgage loan modification services. Supporters say the bill would prevent people in bad financial straits from becoming even worse off.
In addition, the legislation would require for-profit firms to tell potential customers that they could get free assistance from various nonprofit counseling agencies.“The federal fix is going to take care of a lot of the problems we’re experiencing on the foreclosure side of things,” Calderon said. But people looking for help need to be protected, he said.
The California Association of Realtors opposes the bill. The organization objects to the measure’s blanket prohibition on advance fees.Assemblyman Kevin Jeffries, R-Lake Elsinore, said he is open to more foreclosure-related safeguards, up to a point.”My view is that the federal government is getting pretty pro-active in cleaning up the lending industry,” he said. “There’s no reason to duplicate what’s happening at the federal level.”
Several other bills build on parts of SB 1137 dealing with rental tenants in foreclosed properties.One measure would make the buyer of a rental property at a foreclosure sale responsible for returning the tenants’ security deposit.
According to Jim Miller, another bill would give renters up to a year to leave properties that revert to the lender after foreclosure. The renters would have to move if new owners want to move in.“We think having a family there is much better for all parties involved,” said Ronald Coleman, legislative director of the low-income advocacy group Association of Community Organizations for Reform Now, known as ACORN. Vacant homes get run down and attract vandals, he said.
The Federal Reserve has positioned as a buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new home loans.Mortgage lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled bad credit mortgages make it more difficult for loan officers and mortgage brokers to offer lower rates on new mortgage loans. Conventional and FHA mortgage rates were both slightly lower than the previous week.
The gap has narrowed in just a few months between Treasuries and the mortgage rates that the agencies and mortgage lenders have to carry to make them attractive.Read the original article > Mortgage Interest Rates Drop.
Low mortgage interest rates continued this week amid mixed reports about the slowing economy, Freddie Mac’s chief economist said on Thursday.According to Freddie Mac chief economist Frank Nothaft, “Both the core producer price and consumer price indexes ticked up in January, higher than the market consensus, while consumer confidence in February dropped to the lowest reading since records began in January 1967,” said, in a news release. FHA mortgage rates remain low with 5.625% average on thirty year fixed rate home loans.
Thirty-year fixed-rate mortgages averaged 5.07% for the week ending February 26, up from last week’s 5.04% average but still lower than their 6.24% average a year ago, according to Freddie Mac’s weekly survey of conventional rates. Meanwhile, fifteen-year fixed-rate home loans averaged 4.68%, unchanged from last week and down from 5.72% a year ago.
5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.06% this week, up from 5.04% last week; the ARMs averaged 5.43% a year ago. 1-year Treasury-indexed ARMs averaged 4.81% this week, up slightly from 4.80% last week; the ARMs averaged 5.11% a year ago.To obtain current mortgage rates, the fixed interest mortgage loans and the 5-year ARM required payment of an average 0.7 point, while the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.
In the news release Nothaft said “Reductions in home prices and affordable mortgage rates have yet to spur housing demand.” You can see how new sale prices continued to decline home. “For instance, house prices declined by 8.7% for the twelve months ending in December 2008 and were down 10.9% from their highs set in April of 2007, according to the Federal Housing Finance Agency’s purchase-only monthly home price index.
Charlie Lyons elaborates further on the opportunity available for investors to purchase defaulted home mortgages and the roots of the foreclosure crisis.
The housing crisis came as a result of the subprime mortgage meltdown and subsequent banking crisis.FHA mortgage lenders have been trying to help homeowner recover with FHA loan programs like FHASecure and Hope for Homeowners, but they have not been able to slow the loan delinquencies and sliding home values.
Greg McBride from BankRate discusses the mortgage meltdown and Suzy Orman give their different points of view on the Federal Reserve’s rate cuts and how it helps the homeowners, consumers and mortgage lenders!Mortgage interest rates remain low for conforming and FHA home loans.
Seniors over the age of 62 years will be able to use FHA for reverse mortgage loans in conjunction with purchasing of a new house under newly revised guidelines issued by HUD. As of January 1, seniors that want to downsize or can relocate using the proceeds from the sale of their home and an FHA Home Equity Conversion Mortgage to purchase a new residence. “Proceeds from sale of their former home can be combined with funds from reverse mortgages on the new home, allowing the home purchase to be made without any future responsibility of monthly mortgage payments,” said Peter Bell, president of the National Reverse Mortgage Lenders Association. This new feature of the FHA loan program (HECM) also avoids the expense of taking out a regular mortgage on the new residence and then getting a home equity conversion mortgage.
By now most people understand that we have a significant foreclosure crisis evolving. Hundreds of thousands of people each month are receiving a notice of default that is the first step of the foreclosure process.The latest numbers from HUD are stunning: For the first 15 days of October only 49 homeowners with delinquent conventional loans were able to refinance with FHA home loans. That’s less than one per state.
Consider that the highly-anticipated new FHA loan program, Hope for Homeowners was going to cure the mortgage refinancing problems? HUD announced on October 2nd, “The Bush Administration today unveiled additional mortgage loan assistance for homeowners who may be at risk of foreclosure. The HOPE for Homeowners Program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new FHA loan insured by HUD’s Federal Housing Administration.”
In fact, the Bush Administration was vehemently opposed to the legislation and just days before it passed was threatening to veto the FHA Loan Reform bill which included the Hope for Homeowners package.But now FHA mortgage reform has become law. The mortgage law has been effective since July but very few borrowers were able to qualify FHA mortgage applicants. But this refinance program just doesn’t work well for delinquent borrowers because they typically have too many late payments.
HUD recently reports that for the first 15 days of October it had 42 home loan applications and they were unable to approve any of these applicants. Even though the FHA home loan program has a history of helping homeowners with bad credit, the Hope for Homeowner loan is providing very little hope for homeowners who are trying to prevent a foreclosure.
Senator John McCain introduced a new plan during the second presidential candidates’ debate on Tuesday night that he believes will rescue the housing market and bolster the economy.The McCain plan, dubbed the American Homeownership Resurgence Plan, would allow the Secretary of Treasury to buy up bad home mortgage loans, convert them into low-interest FHA-insured loans, and reset the loan principal (therefore decreasing monthly payments) based on a decrease in the value of the home.The McCain camp thinks his plan will save homeowners from foreclosure.
The plan is aimed at helping those 1 in 6 Americans that are now upside down in their mortgages due, in part, to sinking home values.McCain’s home financing plan would give these people a chance to refinance based on the current value of their home.McCain’s plan would be paid for by U.S. taxpayers under funding that’s already been approved in the $700 billion bailout.According to Scott Hess, former WMC executive, “Americans need a new alternative to refinancing, because sadly, most homeowners do not qualify to refinance their home because of tightened lending guidelines nobody anticipated.”Hess continued, “At least with a loan modification, homeowners can restructure their mortgage with a fixed rate and a payment that they can afford.”
Opponents, say his proposal are unfair to homeowners who are paying their mortgage loans every month, and that it’s a bad financing decision.Scott Messina, believes McCain’s plan is a place to begin, but it’s likely won’t solve the mortgage crisis. “It’s a step in the right direction because it attempts to address the issue of rising foreclosures,” said Messina.“However, it’s important for market stability that those people who are paying their mortgages on time and don’t need a bailout are not penalized.”
“Where’s the incentive for homeowners on the brink to do the right thing?If everyone else is getting a bail out with no repercussions, then why should you continue to struggle?” questioned Messina. Under Messina’s plan, the Congress would pass legislation that provides for a new FHA mortgage loan program, the 203S, or the 203 Save program that would be sold as Ginnie Mae securities just like many FHA loans are now and would carry the current guarantee by the U.S. Government.All 203S mortgages would only offer fixed mortgage rates only available to homeowners currently facing foreclosure.
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One positive note to the Countrywide Financial. loan debacle it is that Bank of America now manages the Countrywide loan portfolio and is moving to restructure mortgages as part of an $8.4 billion settlement with three states.With all the news of mortgage lenders working to help troubled borrowers keep up their payments and avoid foreclosure, very few homeowners in these high-cost, risky mortgages have benefited. Bank of America’s agreement with the attorneys general of California, Illinois and Florida isn’t a “we’ll see what we can do” settlement. It’s a must-do resolution of civil lawsuits that could affect 390,000 borrowers.
The B of A program would help homeowners through refinance mortgages into a government-backed FHA loan program, reduce interest rates on adjustable or fixed-rate mortgages or extend low introductory rates so that people aren’t forced into foreclosure because of a rate reset. The goal is to keep home loan payments to about 34 % of a homeowner’s monthly income. That’s reasonable and, we hope, realistic.A Bank of America spokesman says the bank will roll out the foreclosure prevention program to all fifty states, beginning December 1st. An estimated 87,000 Maryland homeowners could potentially benefit, the spokesman said, and state Attorney General Douglas F. Gansler should push to get Maryland involved if a program review shows it would benefit state residents.
As it is, there have been too few initiatives that have delivered real relief for homeowners facing home loan defaults. The state’s efforts, for example, have had limited impact despite increasing to twenty eight the number of housing organizations providing counseling services for refinance loans. According to state figures, state-sponsored mortgage rate modification programs have led to sixty nine mortgage refinances with sixteen16 more pending. In the past eighteen months, at least 8,100 homeowners committed to refinance mortgages to get a better, more stable rate.
But the foreclosure picture here remains sobering. The Mortgage Bankers Association put the number of homes facing foreclosure just this spring at 18,000. Another 65,000 homeowners were late on their payments.Promises to help homeowners avert foreclosure haven’t amounted to much. The attorneys general of California, Florida and Illinois used the power of the law to go after alleged predatory lending practices, and the $8 billion settlement is an impressive return.
Diana Golobay wrote an article recently about wo-thirds of homeowners surveyed in September said they met criteria for a mortgage refinancing program available through the expanded FHA mortgage offerings available under the newly-enacted Hope for Homeowners program, according to a media statement issued Monday by the Consumer Credit Counseling Service of Greater Atlanta.
Homeowners at risk of foreclosure or home loan default who called CCCS of Greater Atlanta for foreclosure prevention counseling in July and August were polled by e-mail regarding the requirements. Of the 591 homeowners polled, 381 – or 64.6 % – indicated through their responses that they were eligible to refinance their current mortgage loans into new fixed-rate mortgage insured by the Federal Housing Administration, according to the CCCS of Greater Atlanta statement.
The Housing and Economic Recovery Act of 2008, which became law in July and took effect Oct. 1, created a mortgage refinancing program intended keep homeowners from foreclosure. To qualify, borrowers must indicate they residence in the at-risk home, their mortgage originated before January 2008 and have no existing home equity lines or other second mortgages. Candidates also needed to indicate they do not own another home and they spend 31 % of their gross monthly income on mortgage debt.
“Our survey results indicate this new FHA loan program holds the potential to help a large number of U.S. citizens struggling to pay their mortgage,” said CCCS of Greater Atlanta president Suzanne Boas in the press statement. “Not everyone will be able to meet the terms. But if someone meets the basic criteria laid out in the housing bill, it would be worth a phone call to their lender to ask about the FHA refinance program.”For the 35% of homeowners polled who indicated multiple loans or second mortgages on the at-risk property, eligibility for the refinance program must wait until all 2nd mortgages or home equity loans are paid off.“Loan modifications could be difficult if the 1st and 2nd mortgage are held by different lenders because only the primary mortgage qualifies for the FHA program,” CCCS of Greater Atlanta said.
Recently, Dale Kasler wrote an article that celebrated the rise of FHA loans in the mortgage industry. He noted the rise in FHA loan applications and new initiatives by HUD. The Federal Housing Administration’s loan program,were nearly forgotten during the years of soaring real estate prices and various no-money-down mortgages, is fueling new lending throughout the Sacramento region.Mortgage brokers said Monday the FHA program, in which the federal government’s guarantees make loans more affordable, accounts for the vast majority of their business. That’s become increasingly true as credit markets tighten and conventional mortgage guidelines become more restrictive.
Some experts said the FHA’s guarantees are playing a major role in the fledgling recovery in Sacramento’s real estate market.“This is the best game in town,” said Michael McGee of Winchester McGee Real Estate & Loans in Rancho Cordova. “It’s the only game in town, really.Jon Kaempfer, a loan consultant with Vitek Mortgage Group in Sacramento, said he does 60 % to 70 % of his loans through the FHA mortgage refinance loan program, “like I did in the old days.”
With conventional lenders demanding down payments of 5 % or 10 %, the 3 % down payment required by FHA has become a bargain. That could make the FHA “the new lender that’s going to deal with risky loans,” said Steven Krohn, an economist and analyst with the Real Estate Group Inc., a consulting firm in Sacramento“They’ve moved in to kind of remove the financing risk from the banks and the investors.”At the same time, Krohn said, the FHA program is putting confidence back in the market.“It’s important that the housing market revive itself,” he said.
The FHA mortgage loan program never went away. But during the boom, market dynamics made the program far less relevant. Borrowers could get mortgages without any down payments. And rising home prices put most deals off limits to FHA guarantees, which were capped at $362,790.Recent reports indicate that California FHA mortgage lenders have not benefitted much from the increased FHA loan limits, because most banks still consider loans above $417,000 as a jumbo loan and the loan to value restrictions are greater. “Everybody was buying $400,000 or $500,000 homes – you couldn’t do an FHA loan,” said Kaempfer, a board member of the California Association of Mortgage Brokers.
I heard an awful report about Citi Mortgage freezing home equity credit lines. A mortgage lender recently reported that one of his clients heloc was frozen without notice. Here are the facts according to mortgage banker Bryan Dornan, “The borrower was a 781, full doc borrower under 40% DTI and under 75% CLTV. The borrower lives in San Diego county and reported that they had always made their mortgage payment on time and they have even made a principal paydown on the credit line that paid off over $100,000 of the outstanding balance.”
One day they received a letter in the mail that CITI was freezing their credit line effective immdiately. The borrower had the option to appeal the decision and when they followed that path, they had to pay for a new URAR appraisal from an appraiser that Citi Mortgage selected. I don’t know about you, but when a 780 fico, full doc borrower under 75% CLTV gets their credit line frozen, I start to wonder… Is this the state of mortgage brokering and lending in 2008? With banks freezing 2nd mortgages on borrowers like this I start to believe that the mortgage crisis has just begun. Please share your recent lending stories.
